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Redeemable Noncontrolling Interests

12 Months Ended

Dec. 31, 2021

Redeemable Noncontrolling Interests

Redeemable Noncontrolling Interests

Note 18. Redeemable Noncontrolling Interests

As discussed in Note 1, during the quarter ended December 31, 2020, Tongmei entered into the Capital Investment Agreements with Investors that invested approximately $48.1 million in the form of redeemable noncontrolling interests representing 7.06% of the outstanding shares of Tongmei. An additional investment of approximately $1.5 million of new capital was funded in early January 2021. Under China regulations these investments must be formally approved by the appropriate government agency and are not deemed to be dilutive until such approval is granted. The government approved the entire approximately $49 million investment on January 25, 2021, at which time the Investors owned a redeemable noncontrolling interests in Tongmei of 7.28%. The initial carrying amount of the redeemable noncontrolling interests was recorded at fair value on the date of issuance of Tongmei’s common stock, net of issuance costs and presented in temporary equity on the consolidated balance sheets. This classification is due to the existence of certain contingencies that could result in potential redemption at the fixed purchase price as described below. We currently do not believe that this is probable thus no amortization of the issuance costs has been recorded.

Pursuant to the Capital Investment Agreements with the Investors, each Investor has the right to require AXT to redeem any or all Tongmei shares held by such Investor at the original purchase price paid by such Investor, without interest, in the event of a material adverse change or if Tongmei does not achieve its IPO on or before December 31, 2022. This right is suspended when Tongmei submits its formal application to the Shanghai Stock Exchange and is accepted for review. Tongmei submitted the application in December 2021 and it was formally accepted for review on January 10, 2022. If the Shanghai Stock Exchange approves the formal application, then they will forward it to the Chinese Securities Regulatory Commission (“CSRC”) for further review. The process of going public on the STAR Market includes several periods of review and is therefore a lengthy process. Tongmei does not expect to complete the IPO until the second half of 2022. If, on December 31, 2022, the IPO application remains under review, then the date when such Investor is entitled to exercise such redemption right shall be deferred to a date when such submission is rejected by the CSRC or stock exchange, or the date when Tongmei withdraws its IPO application. If the application is approved and Tongmei completes an IPO the redemption right is cancelled. The listing of Tongmei on the STAR Market will not change the status of AXT as a U.S. public company.

The components of the change in redeemable noncontrolling interests for the years ended December 31, 2021 and 2020 are presented in the following table (in thousands):

​	​	​
Balance as of January 1, 2020	$	-
Increase in redeemable noncontrolling interests due to issuance of Tongmei's common stock	​	48,102
Equity issuance costs incurred	​	(539)
Net income attributable to redeemable noncontrolling interests	​	-
Effect of foreign currency translation attributable to redeemable noncontrolling interests	​	-
Balance as of December 31, 2020	​	47,563
Increase in redeemable noncontrolling interests due to issuance of Tongmei's common stock	​	1,514
Increase in redeemable noncontrolling interests due to transfer of subsidiary with noncontrolling interests	​	1,241
Increase in redeemable noncontrolling interests due to formation of new subsidiary with noncontrolling interests	​	132
Equity issuance costs incurred	​	(2,591)
Stock-based compensation attributable to redeemable noncontrolling interests	​	40
Net income attributable to redeemable noncontrolling interests	​	889
Effect of foreign currency translation attributable to redeemable noncontrolling interests	​	279
Effect of foreign currency translation on redeemable noncontrolling interests	​	1,318
Balance as of December 31, 2021	$	50,385

​

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- Definition

The entire disclosure for noncontrolling interest in consolidated subsidiaries, which could include the name of the subsidiary, the ownership percentage held by the parent, the ownership percentage held by the noncontrolling owners, the amount of the noncontrolling interest, the location of this amount on the balance sheet (when not reported separately), an explanation of the increase or decrease in the amount of the noncontrolling interest, the noncontrolling interest share of the net Income or Loss of the subsidiary, the location of this amount on the income statement (when not reported separately), the nature of the noncontrolling interest such as background information and terms, the amount of the noncontrolling interest represented by preferred stock, a description of the preferred stock, and the dividend requirements of the preferred stock.

+ References

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-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-URI http://asc.fasb.org/topic&trid=2197479

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